Caltex sees decline in fuel demand

REFINER and fuel retailer Caltex Australia is seeing a slump in fuel demand amid widespread social restrictions and business closures due to the COVID-19 pandemic.

The company says retail fuel volumes were down 16 per cent between January and April 2020 compared with a year earlier.

Caltex also expects Australian demand for jet fuel to slide 80 per cent to 90 per cent while travel restrictions remain in place. The fuel retailer flagged in early April that jet fuel demand had slipped by 5 per cent to 10 per cent.

Things have worsened considerably after Australia banned foreign travel, resulting in Qantas cancelling most of its local and international flights until the end of June and Virgin Australia going into voluntary administration.

Caltex says it is cutting costs and capital expenditure to tackle the crisis. The company has extended a turnaround and inspection at its Lytton refinery in Brisbane, where it will also reduce workforce hours and lower contractor activity.

There will be a temporary reduction in weekly hours at the convenience retail business by 15-20 per cent, utilisation of leave, and a 20 per cent reduction in board and executive remuneration and a 10 per cent reduction for senior leaders for three months.

As a result, it will save $10 million a month in operating costs and also plans to keep capital expenditure below $250 million in 2020.

Caltex Australia has also revived a plan for a share or trade sale of 49 per cent in its core petrol station network. Talks on a potential takeover deal by Canada’s Alimentation Couche-tard ended in April.